Survey of Recent Developments

Publisher Website
Google Scholar
Abstract
SUMMARY GDP grew slowly but steadily during 1999, thus confirming that Indonesia is at last recovering, although more slowly than the other countries most affected by the Asian crisis. Growth in 2000 is officially forecast at 3-4%. With the effects of discretionary fiscal policies included, inflation during 2000 is expected to be in the range 5-8%, compared with 2% during 1999. Indonesia's sluggish output growth is probably due mainly to delays in restructuring the banking sector and resolving corporate debts. About 80% of the Rp 639 trillion of government bonds needed to recapitalise the banks has now been issued. However, with capital-asset ratios of only 4%, and assets dominated by illiquid bond holdings, the banks appear fragile. The meeting of the Consultative Group on Indonesia promised new official loans of $4.7 billion. In addition, Indonesia signed a new agreement with the IMF that raises the total amount of its promised loan from $11 billion to $16 billion. The policies to be followed under the new IMF agreement continue to emphasise the avoidance of money creation as a way of financing the budget deficits that will result from the interest payments on the government's greatly increased debts. The government has unveiled new initiatives to deal with judicial corruption, and hopes that they will improve the workings of the bankruptcy law and hence the restructuring of corporate debt. More important than any economic event was the civilian govern- ment's assertion of its dominance over the military, at least for the time being. Following the finding by the National Commission on Human Rights that General Wiranto should be held accountable for the 'planned and systematic violence' in East Timor, the President forced him out of the cabinet.

This publication has 6 references indexed in Scilit: